Until the COVID-19 pandemic, Brazil’s economy had been steadily gaining momentum since the downturn experienced in 2015 and 2016. While Gross Domestic Product growth can no longer be expected to materialize in 2020, this growth is delayed—not cancelled. Economists currently forecast growth rates as high as 3.6% in 2021. Will your business be prepared for this return to growth?
Over the past decade, Brazil has made strides toward laying the foundation for long-term economic growth. Recent improvements in business transparency and environmental compliance have made Brazil an attractive target for foreign direct investment. A combination of factors, including favorable interest rates and low inflation, further highlights opportunities for investing in Brazil. In addition, expected high unemployment will enable businesses to attract and retain talent. These factors in Brazil are in stark contrast to developed markets, like the United States, that were likely headed toward a downcycle prior to the pandemic.
Experts believe that with the existing market fundamentals, the next positive cycle in Brazil will be even stronger—there will be more value to be gained following the COVID-19 crisis. While conservative strategies will be prioritized in the near-term, these measures must be taken without sacrificing the potential for long-term growth. Fortunately, cost-cutting measures and preparation for future scaling up are compatible. As companies review their business planning to align with pandemic response, they should do so while integrating potential for Brazil’s future growth.
Multinational companies with subsidiaries in Brazil should also prepare for future growth, as they weather this downcycle and anticipate the long-term economic shifts resulting from COVID-19. They should consider the following questions regarding shifts in Brazil’s business environment, keeping in mind that Brazil still has the most Foreign Corrupt Practices Act (FCPA) violations with the U.S. Securities and Exchange Commission/Department of Justice today:
Lessons learned in past downturns, including 2009 and 2015, should be in front of the mind as leaders prepare to emerge stronger from the pandemic crisis. Companies that managed to plan for growth while still preserving cash, managing risk, and maintaining continuity, emerged more successful than their competitors. This period can allow companies to determine what core activities are essential for future growth versus those that can be pared back without compromising future opportunities. Shared services strategies, including centralization, standardization, and automation, can lead to both cost savings and the ability to rapidly scale operations in line with future growth.
Companies can both manage risk and prepare for the end of the downturn by leveraging opportunities related to business model optimization and considering the following:
Actions taken in this period should be thoughtful, ensuring that short-term cuts or other measures continue to strengthen prospects for long-term growth. Companies should look to adopt staffing and service models that optimize the way employees work and account for new risks presented by this changing environment. A focus on high-value activities and creating a resilient, sustainable delivery model will allow companies to adapt to the current crisis as well as future business cycle fluctuations.
ScottMadden and Vistazul provide complementary services that will help companies in Brazil gain the flexibility to both navigate the current environment and prepare for a new business environment.
|Key Activity||Value Today:||Importance Going Forward:|
|Enable Flexible Scaling||Set the stage for “modular” growth to enable quick integration of business processes after an acquisition||Keep costs under control and achieve economies of scale when growth returns|
|Consolidate and Standardize||Reduce cost by consolidating transactional activities in less expensive resources||Transactional work can be co-located and consolidated to drive consistency in service, process efficiencies, and talent management|
|Digitize and Automate||Self-service portals and virtual agents reduce the need for in-person contact and may enable cost reductions||Automation facilitates long-term agility; scale up digital strategies in accordance with need|
|Diagnose Business and Compliance Risk||Avoid compliance issues associated with COVID-19
||A risk-oriented business plan will continue to enable future growth and avoid some challenges|
|Plan and Execute Turnaround / Restructuring||Support on developing and executing a clear turnaround / restructuring plan, both domestically and in conversation with U.S. headquarters||Ensure your company is ready to take advantage of the upcoming market opportunities and growth|
|Provide Interim CEO and C-Suite Executives||Provide business continuity in a time when resources cannot be appropriately dedicated to executive hiring||Experienced leadership will ensure a focus on long-term growth and opportunities|
Additional Contributing Authors: Tina Jeffress, Rodrigo Ogawa of Vistazul
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